Running a business from home has its perks — the comfort of your own space, flexibility in work hours, and fewer overheads, to name a few. But there’s one major advantage that many entrepreneurs overlook: the tax benefits. If you’re not making the most of the tax relief opportunities available to home business owners, you could be leaving money on the table. Let’s dive into some of the most exciting tax breaks you can take advantage of and how they can help your business thrive.

1. Claiming Home Office Expenses: A Smart Way to Save

If your business is based in your home, you’re sitting on a goldmine of potential savings. You’re probably already paying for your rent, mortgage, heating, and electricity — so why not use those costs to your advantage?

What You Can Claim:

• Rent or Mortgage Interest: If you’ve turned a room or space in your home into an office, you can claim a portion of your rent or mortgage interest.
• Utility Bills: Your gas, water, and electricity bills are all up for grabs, too. The more time you spend working in your home office, the higher the deduction.
• Home Insurance: Got a policy to protect your home and business? A percentage of your home insurance premium could be claimed.
• Repairs and Maintenance: Fixing a leaky roof or repainting the office walls? You can claim a chunk of those costs as well.

Example:
Imagine your house has three rooms, and you use one of them exclusively as an office. By calculating the square footage of your office space, you could claim one-third of your household bills like heating and electricity. Plus, if you’re in your office five days a week, you can claim a larger portion for heating. Easy win!

Tip: Stay organised by keeping track of exactly how much space is used for business. Apps can help, making this process a breeze.

2. Business Travel and Vehicle Expenses: Claim What You Deserve

Running a home business doesn’t mean you’re not on the move. From client meetings to delivering products, travel is often essential. The good news? You can claim back many of the costs involved.

What You Can Claim:

• Vehicle Costs: This includes the fuel, insurance, repairs, and even maintenance of your car. You can claim a portion based on how often it’s used for business.
• Mileage Allowance: The UK has a flat rate for business mileage. For example, you can claim 45p per mile for the first 10,000 miles, and 25p per mile thereafter.
• Travel and Accommodation: Business trips? Hotel stays? Meals while you’re away? All these costs are deductible.

Example:
If you rack up 1,000 miles on your car for business, you could claim back £450 at the rate of 45p per mile. That’s a nice chunk of your travel costs covered.

Tip: Use a digital tool to track your mileage automatically, so you’re never left scrambling to remember where you went and when.

3. Capital Allowances: Invest Smart and Save Big

Buying new equipment or software for your home business? Great news — you can claim tax relief on these purchases. Whether it’s a new laptop or software to help streamline your operations, these investments are eligible for tax relief.

What You Can Claim:

• Office Equipment: Desks, chairs, laptops, printers — all the tools you use to run your business are eligible for tax relief.
• Software and Subscriptions: Business-related software, such as accounting tools or project management systems, can be claimed. So can any subscription-based services you rely on.

Example:
Say you bought a £1,200 laptop for business use. If it qualifies under the Annual Investment Allowance (AIA), you might be able to deduct the full amount in one go. This means a reduced tax bill right away!

Tip: Keep those receipts and proof of purchase safe. Even a small purchase could lead to big savings at tax time.

4. Business Insurance and Professional Services: Protection and Peace of Mind

Protecting your business with insurance is not only sensible but also a tax-saving opportunity. Whether it’s covering your equipment or protecting yourself from liability, the premiums can be deducted. The same applies to professional services like accountants and legal advisors.

What You Can Claim:

• Business Insurance: Whether it’s liability insurance or contents coverage, if it’s tied to your business, you can claim it.
• Professional Fees: Any fees you pay to professionals such as accountants, consultants, or legal advisors can be deducted from your taxes.

Example:
If you pay £500 annually for liability insurance or £1,000 for an accountant’s services, both are fully tax-deductible.

Tip: Ensure you’re distinguishing between personal and business insurance or professional fees to maintain accuracy in your records.

5. Training and Development: Invest in Yourself (and Save!)

When you level up your skills, your business benefits. Whether it’s a digital marketing course or a leadership workshop, the cost of professional development is tax-deductible.

What You Can Claim:

• Training Costs: Online courses, workshops, conferences — anything that improves your knowledge and skills for your business can be claimed.
• Conferences and Events: Business networking or trade shows? All tax-deductible.

Example:
Attending a course for £300 or a networking event for £500? Claim it all back.

Tip: Make sure the training is directly related to your business. The closer it is to your day-to-day operations, the better.

6. Marketing and Advertising: Spread the Word and Save

Marketing is essential to growing your home business, and the costs associated with it are fully deductible. Whether you’re running online ads, printing flyers, or keeping your website updated, all these expenses can reduce your tax burden.

What You Can Claim:

• Digital Ads: Facebook ads, Google Ads, Instagram promotions — all tax-deductible.
• Printed Materials: Brochures, business cards, and promotional flyers are eligible too.
• Website Costs: Hosting fees, domain registration, and maintenance costs — all part of your marketing strategy.

Example:
Let’s say you spent £300 on a Facebook ad campaign to promote your new service. You can deduct the full amount from your taxable income.

Tip: Keep a detailed log of your marketing activities and associated costs. This helps you maximise your deductions.

7. Tax-Free Allowances: Free Money?

As a small business owner, you’re entitled to certain tax-free allowances that make it even easier to reduce your tax liability.

What You Can Claim:

• Trading Allowance: If your income from trading is below £1,000, you don’t have to pay any tax on it.
• Marriage Allowance: If you’re married and one of you doesn’t use the full personal allowance, you can transfer some to your spouse to reduce their tax bill.

Example:
If your income from your home business is under £1,000, you won’t need to pay any tax at all. That’s a full tax break just for having a side hustle!

Tip: Keep an eye on changes to these allowances each year. They could change, and you want to be on top of it to save every penny.

Frequently Asked Questions (FAQs)

Q: Can I claim my internet and phone bills?
Yes, as long as they are used for business, you can claim a portion of your internet and phone bills. Make sure to keep accurate records of your business usage.

Q: How do I calculate my home office expenses?
You calculate home office expenses based on the proportion of your home used for business. If you use one room in a house of five rooms, you can claim 20% of your home’s costs (e.g., rent, electricity, insurance).

Q: What if I work from home but don’t have a dedicated office?
You can still claim home office expenses, but the claim might be smaller if you use shared spaces, like the living room or kitchen. It’s all about how much space and time is dedicated to business.

Reference: HMRC – Tax-free allowances

Running a home business is not just about staying organised and keeping customers happy — it’s also about making the most of the tax breaks available to you. By understanding these key tax deductions and benefits, you can save yourself a significant amount each year. So, start tracking your expenses, and don’t hesitate to consult with an expert to ensure you’re maximising every opportunity.

Want Expert Help?

At Legacy Accounting, we specialise in helping home-based businesses like yours get the most out of your tax deductions. Our expert team is here to guide you through every step of the process.

Contact Us:
Email: info@legacyaccounting.co.uk
Phone: 01235 820000
Website: legacyaccounting.co.uk